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Hon Hai Precision Industry, the company assembling Apple’s latest iPhone, saw a sharp drop in profits as production timing issues for the smartphone affected earnings.
Shares in Hon Hai, also known as Foxconn, fell 2.8 per cent in Taipei on Wednesday after the company, the sole assembler of Apple’s iPhone X and a key component supplier, reported net income for the three months to the end of September at NT$21.03bn ($699m), a 39 per cent decline on the same period a year earlier.
The result was mostly driven by lower margins after Hon Hai factories were hit by weeks of idle capacity as teething issues with the iPhone X, related to its 3D sensing technology, were resolved, said Thompson Wu, an analyst at Credit Suisse.
Mr Wu said third-quarter margins sank to four-year lows of 5.8 per cent, widely missing analysts’ expectations of 7.5 per cent. “The key factor in the lower margin was the delay in the launch of the iPhone X, which saw Hon Hai sit on idle labour capacity for several weeks,” he said.
While Taiwan-based Hon Hai was able to shift some of its labour to Apple’s iPhone 8 series, which went on sale in September, the move was “not enough to offset the incurred wage cost for the iPhone X workforce”, he said.
“We knew there was going to be idle capacity, we just didn’t know it was going to be to this…